Construction industry set to gain momentum in 2015

The construction sector is one of the largest sectors in the UK economy accounting for 6.4% of GDP. Following growth of 5.3% last year, the latest forecasts by our Association project output to rise 5.3% during 2015, and then ease to 4.2% and 3.4% in 2016 and 2017 respectively. Thereafter, we expect output to pick up by 3.9% in 2018.

Output growth this year will be aided by a sustained economic recovery, infrastructure and, chiefly, a private housing sector that has played a particularly strong role for the industry so far. Thereafter, output growth may soften due both to the political uncertainties ahead of May’s general election and the Eurozone’s weakness, before the forecast for 2018 brightens with an increase in infrastructure activity.

Summary of key forecasts:

Increased activity in the private housing sector has propelled the construction industry over 2014, mostly due to the success of related government policies. However, with uncertainty regarding these policies in the long-term, private housing starts are expected to slow. Growth of 10.0% is forecast for 2015 and 5.0% in 2016.

Over the forecast period, construction output will primarily be boosted by infrastructure projects. Roads construction and energy infrastructure will contribute significantly to the industry, with growth expected to rise 52.1% and 81.8% respectively from 2014 to 2018.

In the short-term, the strongest growth is likely to come from the electricity sub-sector – outpacing that of rail – due to ongoing nuclear decommissioning work. With projects such as Round 3 offshore wind and National Grid’s £24.6 billion investment, electricity is forecast to sustain growth in the future, reaching 25.0% in 2018.

The future of the commercial sector looks positive, with the improvement in wider economic activity positively impacting this sector. Commercial offices output is forecast to rise by 8.0% in 2015 and 7.0% in 2017, with slower growth in Greater London but accelerating work in other cities. Retail output is forecast to grow at 5.0% in 2015 and 2016, with a slowdown anticipated throughout the rest of the forecast period due to consolidation by supermarkets.

Private housing repair, maintenance and improvement (RM&I) is projected to grow this year by 4.0% until 2016, thereafter growing at 3.0% per year due to a general improvement in the UK housing market and property transactions. However, this sector will continue to face the burden of government policies such as the Green Deal and ECO.